Tory Burch on Empowering Women through Microfinance
The recession has hit small businesses and women particularly hard. Fashion mogul Tory Burch on her solution: microloans for struggling women entrepreneurs in the U.S.
The recession has hit everyone in America hard; particularly those people who decided to pursue the American dream by starting their own small business.
One of the most startling statistics I’ve read about this recession is that more than 4.3 million businesses with 19 or fewer employees closed between Oct 2007 and Oct 2008. With half of the nation’s workforce employed by small businesses, these job losses have had a devastating effect on American families.
The U.S. Census Bureau recently released a report showing that household incomes fell for all Americans in 2008, but that the drop was sharpest for middle income and poor families, pushing more than one million additional hard-working Americans into poverty. The report also said that the 2008 U.S. poverty rate was 13.2 percent, the highest it has been in 11 years. Women have been hit the hardest. They are half the population but make up nearly 60 percent of poor people and an even larger percentage of those in “deep poverty.” In fact, having a baby is the leading cause of U.S. "poverty spells"—when income dips below what is needed for basic living expenses.
The sad reality is that a low-income entrepreneur in a developing country may have a better shot at accessing a small business loan than a low-income entrepreneur in the U.S.
The failure of small companies is in large part due to a lack of access to credit. In 2009, the Small Business Administration (SBA) made loans to 25,000 fewer entrepreneurs than it did in the previous year—36 percent fewer loans than the same program made in 2008.
Access to credit is critical for any entrepreneur. When I started my company, it was an essential part of our launch and without it, we wouldn’t have been able to grow. Today we proudly employ more than 350 employees directly and more through our department store sales. We hope that number will increase but the possibility wouldn’t exist if we had not have access to growth capital along the way.
After much research, I decided the Tory Burch Foundation’s first area of focus would be supporting women entrepreneurs through domestic microfinance . Most people who have heard of microfinance think of small loans given to people to buy a sewing machine or some other small income-generating asset in a developing country. But the same principle applies in the U.S. The loans here are a bit larger—$500 to $5,000, vs. $50 in developing countries—but domestic microfinance helps low-income Americans who don’t typically have access to more traditional forms of employment or financial services. The loans these entrepreneurs get through microfinance help them to successfully support their families by starting, sustaining, and growing their small businesses.
Microfinance isn’t about charity. It is simply about investing in people who might otherwise not have the chance to pursue their goals. It gives entrepreneurs the opportunities many of us take for granted, and it is sustainable–loan repayment rates are typically higher than 90 percent. Investment in small entrepreneurial businesses is one of the most effective ways to both fight poverty and create jobs. Research shows that for every microfinance loan, approximately 1.7 jobs are created and for every dollar invested, between $2 and $2.72 flow back into the economy. In one five year study, 53 percent of low-income entrepreneurs were able to move their families out of poverty. Investing in women in particular improves communities, stabilizes families and increases the possibilities for their children.
That’s an investment we should make.
Get Involved. How to Help. The Tory Burch Foundation provides domestic microfinance loans for women entrepreneurs.
Tory Burch is an award-winning designer living in New York. She launched her lifestyle brand in 2004, after working for some of America’s greatest designers, including Ralph Lauren, Vera Wang, and Narciso Rodriguez. In 2009, she launched the Tory Burch Foundation to provide economic support to women and their families.